TPG Telecom’s Game Plan as Singapore’s Fourth Telco: What Investors Should Know

Australia’s TPG Telecom clinched the winning bid to be Singapore’s fourth telco last week, entering a market that is currently controlled by the trio of Singapore Telecommunications Limited  (SGX: Z74)StarHub Ltd  (SGX: CC3), and M1 Ltd  (SGX: B2F).

The idea of a fourth telco has ruffled the feathers of Singtel and StarHub – the duo believe that a price war could be on the cards. But what are TPG Telecom’s plans? Here’s what we know:

  1. TPG Telecom said that Singapore’s NESA (New Entrant Spectrum Auction) was a rare opportunity to establish a long-term business in Singapore. The Australian telco won all the spectrum available at the auction with a winning bid of S$105 million. This figure is to be paid within 20 business days of the win.
  2. More investments are needed. TPG Telecom expects to incur capital expenditure of another S$200 million to S$300 million to establish a mobile network with nationwide coverage by September 2018. The key word here is “nationwide” – this is a hint on TPG Telecom’s ambitions in Singapore.
  3. TPG Telecom plans to finance its expansion into Singapore through a mix of existing debt facilities and the cash generated from its current operations in Australia.
  4. TPG Telecom might have the firepower to manage the financial obligations. For its financial year ended 31 July 2016 (FY2016), the Australian telco raked in A$759 million in operating cash flow. Free cash flow was a healthy A$318 million.
  5. TPG Telecom plans to deliver services to Singapore customers in 2018. The Australian telco believes that it can quickly take between 5% and 6% market share and become EBITDA (earnings before interest, taxes, depreciation and amortization) positive “within a short time period.” This is the real meat of TPG Telecom’s game plan.
  6. In its media release, TPG Telecom sounded a bullish note, saying its goals are achievable due to the excellent value of the offerings that it plans to bring. There are no details at the moment on its Singapore mobile offerings.
  7. In Australia today, TPG Telecom is offering SIM-only 1.5 GB mobile plans for A$19.99 per month, 3GB for A$29.99 per month, 7GB for A$34.99 per month, and 10GB for A$39.99 per month. Time will tell if TPG Telecom will have similar offers in Singapore.

If you would like to find out more about TPG Telecom’s business, you can head here.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.